China economy

By Freha Amjad

If you are looking to ride a career helicopter into the rarefied echelons of those who earn more than $250,000 a year – then consider becoming an expat working in Asia.

Such a course is suggested by the findings of the latest HSBC Expat Explorer report, which is based on a YouGov survey of 9,288 expats worldwide. Asia is home to the highest earning expats, who are almost three times more likely to earn over $250,000 a year than their counterparts in Europe. Read more >>

There may be some light at the end of the tunnel for China’s beleaguered housing market, according to a survey of real estate developers by China Confidential. Home sales growth in October was the highest in 18 months, while a separate survey of urban consumers shows home buying sentiment at a multi-year high.

China Confidential’s monthly survey of 300 real estate developers across 40 cities, showed a sharp rebound in sales volumes in October, with companies reporting the biggest month-on-month increase since March 2013. Developers reported an even larger expansion in sales inquiries, suggesting that many potential home-buyers remain on the side-lines. Read more >>

By Matt Gamser and Paul Lee

A new wave of financing innovations is democratising access to capital, especially for those most vulnerable among small, medium and micro-enterprises (SMMEs). Are governments and large financial institutions ready to embrace these innovations and enable the necessary regulatory reforms to support the growth of entrepreneurs across Asia?

Raising capital has always been one of the greatest challenges for the growth and sustainability of SMMEs. The International Finance Corporation estimates that the total unmet need for credit by SMMEs globally ranges from US$2.1tn to US$2.5tn. In East Asia alone, the credit gap is a massive US$900bn to US$1.1tn. Read more >>

Unofficial readings on China’s industrial activity released on Thursday add to a sense that the underlying economic vibrancy of the world’s second largest economy may have continued its ebbing trend into October.

This may surprise those who bought into the notion that industrial output rebounded strongly in September, rising to 8 per cent year on year, up from 6.9 per cent in August. In fact, though, that September “rebound” was largely the result of a big statistical base effect, according to China Confidential research.

Similarly, the announcement on Thursday of a pick up in HSBC/Markit’s manufacturing Purchasing Manager’s Index (PMI) to 50.4 in October so far – up from 50.2 in September – is misleading. In fact, readings on manufacturing output and new orders – the key measures of industrial vibrancy – revealed markedly weaker trends. Read more >>

In a private meeting with the US Ambassador to China in 2007, provincial Communist Party secretary Li Keqiang described his country’s GDP figures as “man-made” and unreliable.

To get a good idea of what was happening to the economy in his province of Liaoning, Li said he preferred to focus on three alternative indicators: electricity consumption, volume of rail cargo and the amount of loans disbursed.

All other figures, and especially GDP statistics, were “for reference only”, Li told the Ambassador, with a broad smile on his face. Read more >>

GDP growth. Third-quarter growth could be the slowest since the depths of the global financial crisis, when China reported 6.6 per cent growth in the first quarter of 2009.

As if to add substance to complaints from emerging market policymakers about being ignored, a matter mainly affecting middle-income countries became the subject of close global attention only when it emerged as a bone of contention between the US and Europe.

The snappily-titled “investor-state dispute settlement” (ISDS) process, where companies have the right to sue governments for disadvantaging their businesses, has been the subject of deep controversy for years. But since the most vocal discontents were nations like Argentina and Venezuela that complain about more or less everything, it took well-organised campaigning and official German opposition to an ISDS chapter in the US-EU Transatlantic Trade and Investment Partnership (TTIP) to make it a central concern. Read more >>

A reported export surge in September is failing to dispel the gloom suffusing forecasts for China’s third quarter GDP growth, which several economists predict will slump to a five-year low.

One problem lies with the export numbers themselves, which raise suspicions that over-invoicing may once again be artificially inflating export statistics as Chinese smuggle hot money into the mainland from Hong Kong to take advantage of an appreciating renminbi. Read more >>

By George Magnus

Serial disappointments in emerging country growth rates since 2011 has forced the International Monetary Fund (IMF) to cut its five-year-ahead forecasts for a group of 153 emerging and low-income developing countries on six occasions since late 2011 (see chart).

However, in its latest World Economic Outlook, the IMF again assumes that current disappointments will give way to restored equilibrium growth rates over the next five years. But what if there is no equilibrium and emerging market (EM) growth continues to disappoint? Read more >>

By Michael Power, Investec Asset Management

“Are we nearly there yet?” Most of us have faced – and in our younger days probably asked – the same question. As with children on long car journeys, this question is also posed by investors who cannot wait for bear markets to be over.

Commodity investors – and recently this has expanded from the metals and coal complexes to include oils – are wondering aloud when their recent ordeal will all be over. The same can be said for investors in those commodity-rich countries, as they survey their currency-ravaged portfolios. And this phenomenon is not confined to emerging markets (EM) – investments in Australia, Canada and even Norway have suffered the same fate. Read more >>

By Andy Rothman, Matthews Asia

China’s housing market is one of the most important parts of its economy, and also one of the most misunderstood. This sector is important because residential real estate together with construction last year accounted directly for about 10 per cent of GDP, 18 per cent of fixed-asset investment, 10 per cent of urban employment and more than 15 per cent of bank loans. It is also misunderstood because few observers appear to grasp the structure of China’s residential market. Read more >>

By Eswar Prasad, Karim Foda, and Abhinav Rangarajan

China is making steady progress on its path to making the renminbi an international currency, as the FT writes in a Special Report, The Future of the Renminbi, published today.

See here for an Interactive graphic that traces the renminbi’s progress since 2000.

China continues to gradually open up its capital account, make offshore renminbi liquidity more easily available, and sign up more renminbi trading centers (London and Frankfurt most recently). To become a reserve currency, China also needs to let the renminbi’s value be market-determined rather than being tightly managed relative to the US dollar.

On March 16th of this year, China took another step towards freeing up its currency. The daily trading band around the renminbi’s central value relative to the U.S. dollar was widened from 1 percent to 2 per cent in either direction. The reasonable expectation had been that this would lead to faster appreciation of the currency and more volatility. Instead, the opposite happened. Was the shift to a wider trading band just a head fake? Read more >>

Official statements on bad loans in Chinese banks come with a health warning: analysts widely believe they understate the real level of delinquency by a wide – though unknowable – margin.

Nevertheless, official statistics can be helpful in assessing whether the problem is deepening or alleviating. In that context, an analysis published on Thursday by EY, the accounting firm, shows stress levels rising rapidly among China’s top banks. Read more >>

A closely-watched indicator of economic activity in China is showing an unexpectedly robust reading for September, according to an announcement on Tuesday. But is a real growth rebound underway, following several signs of a slowdown in the third quarter so far?

Hong Kong stock market investors appeared to reserve judgement, allowing the Hang Seng index to slip 0.49 per cent, or 118 points on Tuesday to 23,837. Economists and other survey-based indicators of Chinese economic activity reinforced the skepticism. Read more >>